药明合联：XDC创新探索爆发，CRDMO龙头增长强劲

Investment Rating and Valuation - The report gives a "Buy" rating for the company with a target price of HKD 31.25 per share based on a DCF valuation model [2] - The current market price is HKD 26.50, indicating a potential upside of 17.9% to the target price [3] Core Investment Thesis - The company is a global leader in the XDC CRDMO (Contract Research, Development, and Manufacturing Organization) sector, benefiting from the explosive growth of the ADC/XDC market [1] - The global ADC market surpassed $10 billion in 2023, driven by the success of HER2 ADC drugs like Enhertu, which has rewritten the standard of care for breast cancer [1] - The company's revenue, gross profit, and net profit grew by 67.6$1 billion in the past year, indicating strong capital market activity [1] - The complexity of ADC/XDC drug development, which combines large and small molecules, has led to a high outsourcing rate, benefiting CRDMO providers like the company [1] - The global ADC market is expected to grow from $10 billion in 2023 to$30 billion by 2028, driven by the increasing adoption of ADC drugs in cancer treatment [93] Company Strengths - The company is one of the few global players with end-to-end capabilities in XDC CRDMO, covering R&D, manufacturing, and commercialization [1] - Its "Empower, Follow, and Win the Molecule" strategy has enhanced customer stickiness, with 41 projects transitioning from early to late-stage development in 1H24 [1] - The company has a strong customer base, with the number of clients growing from 345 in 2022 to 419 in 2024, reflecting its expanding market reach [1] Capacity Expansion and Future Growth - The company is expanding its production capacity in Wuxi, Changzhou, and Shanghai, which will help reduce reliance on external suppliers and improve gross margins [1] - A new production facility in Singapore is expected to be operational by the end of 2025, catering to the growing demand for overseas orders [1] - The company plans to replace externally sourced antibodies, linkers, and payloads with in-house production, further boosting profitability [1] Financial Performance and Projections - Revenue is projected to grow by 57.5%, 44.0%, and 32.6% in 2024, 2025, and 2026, reaching RMB 3.34 billion, RMB 4.82 billion, and RMB 6.38 billion, respectively [2] - Net profit is expected to grow by 152%, 45%, and 37% in the same period, reaching RMB 715 million, RMB 1.04 billion, and RMB 1.42 billion, respectively [2] - The company's ROE is forecasted to increase from 11.63% in 2024 to 16.61% in 2026, reflecting improving profitability and operational efficiency [5] Competitive Advantages - The company has a leading position in the global XDC CRDMO market, ranking second globally and first in China by revenue in 2022 [147] - Its proprietary WuXiDAR4 technology platform enables precise control over drug-to-antibody ratios (DAR), reducing manufacturing costs and improving product homogeneity [172] - The company has a robust pipeline with 564 ADC projects and 141 XDC projects as of 1H24, providing a strong foundation for future growth [173]